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Copper hits record amid reports of China exposure
news.yahoo.com
By Richard McGregor in Beijing, Rebecca Bream in London and Kevin Morrison in Johannesburg
Mon Nov 14, 2:05 PM ET
World copper prices hit new highs on Monday after speculators seized on reports that China, the world's largest user, may be forced to buy large quantities of the metal to cover a short position.
Copper, which has risen 30 per cent this year, touched an all-time high of $4,132 a tonne during trading on the London Metal Exchange on Monday, having risen sharply on Friday.
Metal traders said market speculation had been fuelled by the mysterious disappearance of trader Liu Qibing, who they believed worked for China's State Reserve Bureau, which manages the country's strategic commodities reserves.
According to the Dow Jones newswire, Mr Liu went missing after building up a short position of between 100,000 and 200,000 tonnes of copper metal he had sold without owning, in the hope he could buy it back more cheaply at a later date. Instead, copper prices have continued to rally.
Last week, China tried to cool the market by announcing it would sell 20,000 tonnes of copper on Wednesday and saying that it held 1.3m tonnes of copper in stockpiles. But these announcements from a normally secretive operator stoked market rumours that the SRB was actually short of copper and was trying to depress prices in order to avoid a large trading loss.
LME traders said on Monday Mr Liu was well known in the market as a trader for the SRB, but the SRB denied that it employed him. An SRB spokesman in Beijing said: "We don't have anyone on staff named Liu Qibing." The spokesman said the SRB had undertaken trades on the London Metal Exchange "in an effort to stabilise domestic copper prices".
Although Mr Liu has not been active in the market for some weeks, a Shanghai-based analyst for a foreign securities firm said on Monday night that he was at his home in the city after being ordered to stay away from work. "He has turned off his mobile phone but he is ok," the analyst said.
The analyst, who asked not be named, said Mr Liu was being forced to take responsibility for the trades that had resulted in losses of "several million dollars".
Mr Liu, who is in his 40s, was described as an experienced trader, with at least a decade of experience in the market, and who in the past had been very successful.
A Shanghai-based futures broker, who also asked not to named, said the SRB had been sending "very confusing signals" to the market. "Even though it is meant to be a market stabiliser, it is actually speculating on copper prices," the trader said.
Market uncertainty could continue for some weeks. Traders said even if China had enough copper to cover any short position, it might face problems shipping the metal to LME warehouses in time. They said the next key delivery date was December 21. |
